[GLBSE] PureMining: Infinite-term, deterministic mining bond

[stochastic]

I've been asked about bulk/presale discounts. I'm not a fan of these things but I guess it couldn't hurt if done modestly and openly. So here are the terms:

1. Out of the 5000 bonds currently issued, up to 3000 are elligible for preordering.
2. Preorder must be at least 500 bonds.
3. Discount will be 2%. The actual price will be determined and disclosed when the bonds are offered publicly.
4. Preordered bonds will start to be delivered after bonds are publicly put on sale.
5. The preorder agreement isn't binding for either party. The buyer can cancel the order if he's unhappy with the price or for any other reason. I can also back out of the deal, but will only do that with a good reason.
6. If more bonds are preordered than available, buyers will be put on a waiting list. Bonds will be offered to buyers who are still interested in the order they requested the preorder.
7. Preorder request can be done by either posting in this thread or sending a PM.

I think there should be a required amount of time to hold the bonds if someone pre-orders them.  Otherwise they might just resell the at your IPO and you would then be in competition with the preordered bonds and the new ones you are releasing.

[GeoRW]

I will issue 5000 more bonds early next week.

The price will be somewhat lower than the last issue, to account for hardware advances and the increase in the BTC exchange rate, both of which mean that more hashrate can be bought per bitcoin.

I wonder if you already paid your current bond holders enough on dividends, so they don't go into loss when you will be pushing market price down while issuing more of these bonds at lower price. I don't hold any of these bonds, just curious. 

[Meni Rosenfeld]

I think there should be a required amount of time to hold the bonds if someone pre-orders them.  Otherwise they might just resell the at your IPO and you would then be in competition with the preordered bonds and the new ones you are releasing.

There is no way to enforce this. I've added a clause saying this is not an intended use case.

I will issue 5000 more bonds early next week.

The price will be somewhat lower than the last issue, to account for hardware advances and the increase in the BTC exchange rate, both of which mean that more hashrate can be bought per bitcoin.

I wonder if you already paid your current bond holders enough on dividends, so they don't go into loss when you will be pushing market price down while issuing more of these bonds at lower price. I don't hold any of these bonds, just curious.  

I make an effort to preserve investor value, but there is absolutely no guarantee that the bond will produce a net profit over its lifetime. The market conditions change and the bond price will adapt, whether I'm issuing new bonds or not.

I'm handling this in the fairest way I know and it's impossible to please everyone. If I price it too high I may end up stuck with bonds nobody wants to buy (and lowering the price then would be even more problematic). If I announce a new price without any waiting period there will be resentment among people who have recently bought for higher. By being vague I'm giving people an opportunity to reassess their evaluation and act accordingly - but those people can end up unpleasantly surprised if the issue price turns out to be higher than they expected.

Two important events have happened since the last issue: BTC appreciation to the $6.5 level, and BFL's announcement of their planned ASIC pricing - which should be taken with a good serving of salt, but is still edible.

Anyway, to more directly answer your question - the total coupons paid per bond so far is 0.076534754 BTC (not including errors and compensation). So whether this is a profit or loss really depends on how long one has held the bond and how much he paid for it. The highest price the bonds were offered by me (correcting for compensation) is 0.4 BTC.

It also depends if you're looking at the profit of holding bonds compared to holding BTC or holding USD. Compared to USD I think it will be a profit for everyone who bought from me. BTC price affects the difficulty which affects the BTC price of a mining bond, so the position of holding a mining bond is positive but still lower than directly holding BTC, so people should expect not to profit as much from a BTC rally as if they were holding BTC.

[Meni Rosenfeld]

I have decided to take a more active role in ensuring the stability of the PureMining traded price, by placing a bid of 1000 bonds at 0.3 BTC.

I do not commit to keeping it active forever, but I will make an effort not to change this bid without a week of prior notice.

If the bid gets executed I may replenish it at my discretion.

Hopefully this should prevent low-volume selling from drastically affecting the price, which could prevent the fear of a panic sell from fulfilling itself. Ideally, the bid needn't be executed at all - it would inspire enough confidence in the bond value that people will place their own higher bids.

Going forward I will consider using the bot I'm developing for POLY to act as a more active market maker for PureMining, offering tighter spreads for buyers and sellers. One problem is that GLBSE's fee structure makes it technically more difficult to be a market maker.

[server]

I have decided to take a more active role in ensuring the stability of the PureMining traded price, by placing a bid of 1000 bonds at 0.3 BTC.

Thank you

[Meni Rosenfeld]

I have issued 5000 new bonds. They are offered at 0.28 BTC each.


Most of us have heard about Butterfly Labs' announcement of an ASIC unit coming in October, producing 1 TH/s at a cost of $30K.

When I started PureMining what I had in mind was a world where mining equipment performance grows at a steady and more or less predictable rate as new technologies are developed and enter the market. The eventual advent of dedicated ASIC products was of course no secret, but I always assumed a gradual pricing strategy. People would know how much hashrate they can get for their bitcoin, and would rather substitute physical hardware purchase with a deterministic bond investment that would remove the hassle and shift some of the risks to those in the best position to evaluate them.

I did not envision a company offering a product that overnight vigintuples the available price/performance, much less a trade-in program that renders the hashrate of one company infungible with the hashrate of another company. In this scenario a deterministic bond is much less directly entangled with the underlying hardware, and much more reminiscent of a speculative instrument.

Once the dust settles PureMining will once again shine in the role it was intended for. For now there is uncertainty about BFL's ability to deliver on their promise, and given this there is no logically obvious way to price the bonds. I do however wish to increase the total count to 20000, a nice round number which matches my current capacity. I am offering new bonds at 0.28 BTC, a price which acknowledges the recent depression in the mining bond market on one hand, but avoids excessive devaluation of current investors' holdings on the other. If you believe BFL will deliver a product with the stated specifications, on time, and with sufficient production capacity, you should not buy the bond at this price. If you have no such belief you are welcome to consider this offer. I will not offer bonds at a lower price until the ASIC situation becomes clearer.

Personally I do intend to try to take advantage of BFL's trade-in program, and I may consider offering a complementary asset to those who do want to invest in its ASIC equipment.

[brendio]

Personally I do intend to try to take advantage of BFL's trade-in program, and I may consider offering a complementary asset to those who do want to invest in its ASIC equipment.

That should confuse people who don't know the difference between complementary and complimentary! 

[Meni Rosenfeld]

Coupon payment summary for June 2012 (total 0.01934658 BTC per bond):

Code:

Block number	Timestamp        	Timestamp (Unix)	Elapsed time	Difficulty	Block reward	Coupon    	Bonds	Total      	Status
186815    	Jun 29 2012 21:39:24  	1341005964          	203520    	1726566.55919 	50        	0.0013722521	20000	27.4450420	Paid
186479    	Jun 27 2012 13:07:24  	1340802444          	190252    	1726566.55919 	50        	0.0012827914	20000	25.6558280	Paid
186143    	Jun 25 2012 08:16:32  	1340612192          	192041    	1726566.55919 	50        	0.0012948539	20000	25.8970780	Paid
185807    	Jun 23 2012 02:55:51  	1340420151          	211481    	1726566.55919 	50        	0.0014259299	15000	21.3889485	Paid
185471    	Jun 20 2012 16:11:10  	1340208670          	182860    	1583177.84744 	50        	0.0013446187	15000	20.1692805	Paid
185135    	Jun 18 2012 13:23:30  	1340025810          	177791    	1583177.84744 	50        	0.0013073450	15000	19.6101750	Paid
184799    	Jun 16 2012 12:00:19  	1339848019          	184346    	1583177.84744 	50        	0.0013555457	15000	20.3331855	Paid
184463    	Jun 14 2012 08:47:53  	1339663673          	191909    	1583177.84744 	50        	0.0014111585	15000	21.1673775	Paid
184127    	Jun 12 2012 03:29:24  	1339471764          	189299    	1583177.84744 	50        	0.0013919664	15000	20.8794960	Paid
183791    	Jun 09 2012 22:54:25  	1339282465          	183801    	1583177.84744 	50        	0.0013515381	15000	20.2730715	Paid
183455    	Jun 07 2012 19:51:04  	1339098664          	197893    	1591074.96185 	50        	0.0014479379	15000	21.7190685	Paid
183119    	Jun 05 2012 12:52:51  	1338900771          	197285    	1591074.96185 	50        	0.0014434893	10000	14.4348930	Paid
182783    	Jun 03 2012 06:04:46  	1338703486          	183962    	1591074.96185 	50        	0.0013460079	10000	13.4600790	Paid
182447    	Jun 01 2012 02:58:44  	1338519524          	214732    	1591074.96185 	50        	0.0015711450	10000	15.7114500	Paid

[Meni Rosenfeld]

Coupon payment summary for June 2012 (total 0.01934658 BTC per bond):

Do you mine solo, or do you use a pool ?

Inaba is in charge of these decisions. I don't believe he's mining solo. Of course this has no effect on the coupons paid.

[Meni Rosenfeld]

Coupon payment summary for July 2012 (total 0.017129391 BTC per bond):

Code:

Block number	Timestamp        	Timestamp (Unix)	Elapsed time	Difficulty	Block reward	Coupon    	Bonds	Total      	Status
191519    	Jul 30 2012 10:53:56  	1343645636          	172741    	1866391.30500 	50        	0.0010774643	20000	21.5492860	Paid
191183    	Jul 28 2012 10:54:55  	1343472895          	171117    	1866391.30500 	50        	0.0010673346	20000	21.3466920	Paid
190847    	Jul 26 2012 11:22:58  	1343301778          	177745    	1866391.30500 	50        	0.0011086765	20000	22.1735300	Paid
190511    	Jul 24 2012 10:00:33  	1343124033          	192874    	1866391.30500 	50        	0.0012030429	20000	24.0608580	Paid
190175    	Jul 22 2012 04:25:59  	1342931159          	202379    	1866391.30500 	50        	0.0012623299	20000	25.2465980	Paid
189839    	Jul 19 2012 20:13:00  	1342728780          	191829    	1866391.30500 	50        	0.0011965248	20000	23.9304960	Paid
189503    	Jul 17 2012 14:55:51  	1342536951          	191514    	1751454.53534 	50        	0.0012729513	20000	25.4590260	Paid
189167    	Jul 15 2012 09:43:57  	1342345437          	179959    	1751454.53534 	50        	0.0011961478	20000	23.9229560	Paid
188831    	Jul 13 2012 07:44:38  	1342165478          	203218    	1751454.53534 	50        	0.0013507452	20000	27.0149040	Paid
188495    	Jul 10 2012 23:17:40  	1341962260          	183059    	1751454.53534 	50        	0.0012167528	20000	24.3350560	Paid
188159    	Jul 08 2012 20:26:41  	1341779201          	181850    	1751454.53534 	50        	0.0012087169	20000	24.1743380	Paid
187823    	Jul 06 2012 17:55:51  	1341597351          	195975    	1751454.53534 	50        	0.0013026026	20000	26.0520520	Paid
187487    	Jul 04 2012 11:29:36  	1341401376          	186253    	1726566.55919 	50        	0.0012558278	20000	25.1165560	Paid
187151    	Jul 02 2012 07:45:23  	1341215123          	209159    	1726566.55919 	50        	0.0014102736	20000	28.2054720	Paid

I have recalled 4000 bonds I have left which are unlikely to be sold before the ASIC dust settles.

[totaleclipseofthebank]

Does Puremining use GPUMAX?

[Meni Rosenfeld]

Does Puremining use GPUMAX?

I don't think so. I'm giving Inaba the freedom to choose where to direct the hashrate, and I wouldn't really mind if he did, but my understanding is that he doesn't currently use GPUMAX.

[aadje93]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

but ill keep my 193 shares (mining till i get 200, then saving up the btc )

its a nice bond that pays every 2-3 days instead of weekly, so less price variance because payment is coming in

[Meni Rosenfeld]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

Yes, the bond is deterministic and will remain 1 MH/s, and its value will be significantly lower when ASIC devices with BFL's reported cost-effectiveness become available.

[totaleclipseofthebank]

Trading at 0.058 now... just snagged some at 0.08.

Thats about a 4.75%/w yield (1000% APR)...

[Bitcoin Oz]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

Yes, the bond is deterministic and will remain 1 MH/s, and its value will be significantly lower when ASIC devices with BFL's reported cost-effectiveness become available.

Are you going to offer an ASIC related bond ?

[Meni Rosenfeld]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

Yes, the bond is deterministic and will remain 1 MH/s, and its value will be significantly lower when ASIC devices with BFL's reported cost-effectiveness become available.

Are you going to offer an ASIC related bond ?

Possibly.

[Factory]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

Yes, the bond is deterministic and will remain 1 MH/s, and its value will be significantly lower when ASIC devices with BFL's reported cost-effectiveness become available.

Are you going to offer an ASIC related bond ?

Possibly.

Out of shareholder interest; would you consider a program which allowed PUREMINING bonds to be upgraded into the ASIC bonds at a discount relative to purchasing the new ASIC issuance on the open market? Any form of a program such as that would definitely instill investor confidence for the long term.

[Meni Rosenfeld]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

Yes, the bond is deterministic and will remain 1 MH/s, and its value will be significantly lower when ASIC devices with BFL's reported cost-effectiveness become available.

Are you going to offer an ASIC related bond ?

Possibly.

Out of shareholder interest; would you consider a program which allowed PUREMINING bonds to be upgraded into the ASIC bonds at a discount relative to purchasing the new ASIC issuance on the open market? Any form of a program such as that would definitely instill investor confidence for the long term.

I'm sure it will have a long-term effect. Just not what I think of as a positive effect. I have spoken at some length here and elsewhere about my vision for PureMining, which is to serve as a stepping stone towards a commodity market for hashrate which is independent of any issuer's decisions or a particular hardware brand. This is the only way for mining investments to be efficient in the long run. To offer an upgrade plan will be a step back to a guessing game what will each issuer do.

People need to understand the distinction between the two different investment models. Running a company is safe for the issuer because if anything bad happens he doesn't have to compensate for it out of pocket. This is why he can offer at low prices and share the rewards of good events. But the investors are taking the risk of anything bad happening with the issuer, his equipment or whatever. In the deterministic model, the issuer specifies an exact contract and is bound to fulfill it unconditionally. The investors know exactly what they are getting, and the issuer is taking all the risk. This is why there will be a premium for this. It is not reasonable to expect an unconditional fulfillment and significant bonuses. In the case of mining bonds, investors have but one responsibility - to estimate the future of the price/difficulty ratio; and if they erred in their estimation, it is not reasonable to expect compensation for it. I do not want to create a precedent where investors learn to rely on crutches rather than taking responsibility for their investment decisions.

Even if I were to be convinced to offer such an upgrade, on the grounds that it only slightly taints the deterministic model, it would not be fair to do it now after I have already clarified that no such upgrade will be given and people sold bonds based on this statement.

I want people to do business with me in the future based on my reputation as a man of my word, faithfully honoring the commitments I make (and making an effort to clarify in advance what it is that I am offering). Not on my reputation of handing out freebies.

[Factory]

so after the asic's etc arrive this bond is still 1mhash/s?

then it will crash hard in terms of price because other bonds give you 5-20mhash/s after asic trade in programs...

Yes, the bond is deterministic and will remain 1 MH/s, and its value will be significantly lower when ASIC devices with BFL's reported cost-effectiveness become available.

Are you going to offer an ASIC related bond ?

Possibly.

Out of shareholder interest; would you consider a program which allowed PUREMINING bonds to be upgraded into the ASIC bonds at a discount relative to purchasing the new ASIC issuance on the open market? Any form of a program such as that would definitely instill investor confidence for the long term.

I'm sure it will have a long-term effect. Just not what I think of as a positive effect. I have spoken at some length here and elsewhere about my vision for PureMining, which is to serve as a stepping stone towards a commodity market for hashrate which is independent of any issuer's decisions or a particular hardware brand. This is the only way for mining investments to be efficient in the long run. To offer an upgrade plan will be a step back to a guessing game what will each issuer do.

People need to understand the distinction between the two different investment models. Running a company is safe for the issuer because if anything bad happens he doesn't have to compensate for it out of pocket. This is why he can offer at low prices and share the rewards of good events. But the investors are taking the risk of anything bad happening with the issuer, his equipment or whatever. In the deterministic model, the issuer specifies an exact contract and is bound to fulfill it unconditionally. The investors know exactly what they are getting, and the issuer is taking all the risk. This is why there will be a premium for this. It is not reasonable to expect an unconditional fulfillment and significant bonuses. In the case of mining bonds, investors have but one responsibility - to estimate the future of the price/difficulty ratio; and if they erred in their estimation, it is not reasonable to expect compensation for it. I do not want to create a precedent where investors learn to rely on crutches rather than taking responsibility for their investment decisions.

Even if I were to be convinced to offer such an upgrade, on the grounds that it only slightly taints the deterministic model, it would not be fair to do it now after I have already clarified that no such upgrade will be given and people sold bonds based on this statement.

I want people to do business with me in the future based on my reputation as a man of my word, faithfully honoring the commitments I make (and making an effort to clarify in advance what it is that I am offering). Not on my reputation of handing out freebies.

Of course. I did not want to make it sound like investors should have freebies.

Thanks for further rationalizing your thoughts, and I fully understand your position.